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This is part 1 of our multiple part series examining Bolar and Bolar-like exemptions in U.S. as well as in a number of foreign jurisdictions.

U.S. Bolar Exemption

For most patented products in the U.S., on the day a “blocking” patent expires, a competitor can begin selling what was, up until that point, an otherwise infringing product. However, for a long time, with respect to pharmaceuticals, this simply was not the case. Because the marketing of pharmaceuticals is strictly regulated by the U.S. Food and Drug Administration (FDA), a drug developer is required to comply with various statutes, regulations, guidelines and requirements before marketing approval is awarded. It was well known that the marketing approval process is a long, arduous process that takes several years.

Additionally, U.S. law provides a very narrow research or experimental use exemption with respected to patented inventions. The exemption is so narrow that it is limited to actions performed for “amusement, to satisfy idle curiosity or for strictly philosophical inquiry”. Madey v. Duke University, 307 F.3d 1351 (Fed. Cir. 2002). In addition, in 1984, the Federal Circuit decided Roche Products, Inc. v. Bolar Pharmaceutical Co., 733 F.2d 858 (Fed. Cir. 1984), holding that a manufacturer could not begin the testing needed to obtain regulatory approval of a drug without infringing blocking patents. Unfortunately, the Roche decision further delayed the entry of generic drugs into the marketplace by delaying the availability of generic drugs by allowing a patentee to maintain market exclusivity for a period of time after its blocking patent(s) expired.

In response to the Roche decision, Congress enacted the Drug Price Competition and Patent Term Restoration Act of 1984 (Pub. L. No. 98-417, 98 Stat. 1585 (codified as amended at 35 U.S.C. §§ 156 and 271(e)), which is often referred to as the “Hatch-Waxman Act”. The Hatch-Waxman Act overruled Roche and created the Section 271(e)(1), which is often referred to as the “Safe Harbor” or “Bolar” exemption. The Safe Harbor insulates certain activities from patent infringement. Specifically, Section 271(e)(1) reads:

It shall not be an act of infringement to make, use, offer to sell, or sell within the United States or import into the United States a patented invention (other than a new animal drug or veterinary biological product (as those terms are used in the Federal Food, Drug, and Cosmetic Act and the Act of March 4, 1913) which is primarily manufactured using recombinant DNA, recombinant RNA, hybridoma technology, or other processes involving site specific genetic manipulation techniques) solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products.

It is important to note that the Safe Harbor is not limited to generic only products. It is applicable to branded pharmaceuticals, medical devices, biologics and biosimiliars.

The Safe Harbor has been interpreted broadly by U.S. courts and, as a result, exempts a wide variety of activities having an ultimate commercial benefit provided that the conduct is reasonably related to gaining information relevant to the FDA approval process. The U.S. Supreme Court opined on the Safe Harbor in Merck KGaA v. Integra Lifesciences I, Ltd., 545 U.S. 193 (2005). In this decision, the Court held that the text of Section 271(e)(1) extended to all uses of patented inventions that are reasonably related to the submission of any information to the FDA. As a result, the Safe Harbor includes preclinical studies of patented compounds that are appropriate for submission in the regulatory process. Moreover, the Court stated that under certain conditions, the exemption could include: (1) experimentation on drugs that were not ultimately the subject of FDA submission; or (2) the use of patented compounds in experiments that were not ultimately submitted to the FDA. Additionally, in a series of decisions subsequent to Merck, the Federal Circuit held that the Safe Harbor can exempt both pre- and post-approval activity. However, in Momenta Pharms., Inc. v. Teva Pharms. USA Inc., 809 F.3d 610 (Fed. Cir. 2015), cert. denied sub nom. Amphastar Pharms., Inc. v. Momenta Pharms., Inc., 137 S. Ct. 68 (2016), the Court stressed that the Safe Harbor was directed to seeking FDA approval and would only cover limited types of post-approval conduct that are truly required by FDA:

The routine record retention requirements associated with testing and other aspects of the commercial production process contrast with non-routine submissions that may occur both pre- and post-approval, such as the submission of investigational new drug applications (“INDs”), new drug applications (“NDAs”), supplemental NDAs, or other post-approval research results….The routine quality control testing of each batch of generic enoxaparin as part of the post approval, commercial production process is therefore not “reasonably related to the development and submission of information” to the FDA, and it was clearly erroneous to conclude otherwise.

Under Momenta, any type of quality control testing that is a “habitual” or “regular” part of the production process and not related to obtaining FDA approval is not likely be exempt.

Examples of activities which may fall under the Safe Harbor (provided that there is clear link between such activities and efforts to obtain regulatory approval) include: supplying active ingredients, stockpiling drug inventory, preclinical studies, submitting regulatory data to a foreign agency where the data was submitted or is going to be submitted to the FDA, using research tools, using FDA data to prepare a patent application, using a patented product to develop an alternative FDA-approved manufacturing process , etc. Examples of activities that have been found by U.S. courts not to fall under the Safe Harbor include: manufacturing patented products in the U.S. for shipment to foreign regulatory authorities, use of product for foreign clinical trials where no indication that results would be submitted to the FDA and basic research.

Finally, under U.S. law, it should be understood that the Safe Harbor is an affirmative defense and the defendant has the burden of establishing and proving the defense during litigation. As a result, a party seeking to rely on the Safe Harbor should keep detailed records regarding its “infringing” conduct to establish the Safe Harbor.

Section 107A of the Indian Patents Act, 1970 (Patents Act) is generally referred to as India’s “Bolar exemption”. This section provides a defense for patent infringement in those instances when an invention is used or sold by a third party for purposes related to research and development. Specifically, this section recites:

“107A. Certain acts not to be considered as infringement – For the purposes of this Act,—

(a) any act of making, constructing, using, selling or importing a patented invention solely for uses reasonably related to the development and submission of information required under any law for the time being in force, in India, or in a country other than India, that regulates the manufacture, construction, use, sale or import of any product;

(b) importation of patented products by any person from a person who is duly authorized under the law to produce and sell or distribute the product,

shall not be considered as an infringement of patent rights.”

On November 5th, in Bayer Corporation (Bayer) v. Union of India & Ors (NPL), the High Court of Delhi (Court) examined the scope of India’s Bolar exemption. Specifically, the issue to be decided in this case was whether the exportation of an active pharmaceutical ingredient (API) constituted a defense to infringement under Section 107A of the Patents Act.

Case history

Bayer owns Indian Patent 215758 (the ‘758 patent) that claims sorafenib tosylate (sorafenib) and expires on January 12, 2020. Sorafenib is used to treat patients with advanced kidney and liver cancer and is sold under the brand name “Nexavar”. Sorafenib has been shown to extend the life of patients suffering from kidney cancer by four to five years and six to eight months for those suffering from liver cancer.

Bayer alleged that NPL was manufacturing a product that infringed the claims of the ‘758 patent and filed a civil suit to restrain NPL from launching, making, using, offering for sale, selling and importing sorafenib, any product containing sorafenib or any other product encompassed by the claims of the ‘758 patent. On March 9, 2012, NPL applied for and received a compulsory license to manufacture pharmaceutical products covered under the ‘758 patent. The compulsory license allowed NPL to manufacture a pharmaceutical product covered by the ‘758 patent under certain terms and conditions. Specifically, the license was “solely for the purpose of making, using, offering for sale and selling the drug covered by the patent for the purpose of treating HCC and RCC in humans within the territory of India” (emphasis added). As a result of the compulsory license, NPL has been manufacturing a product under the brand name “Sorafenat”. However, under the terms of the license, NPL is not permitted to export Sorafenat.

After the compulsory license was granted, Bayer filed an application at the Indian Patent Office seeking termination, revocation/cancellation of the compulsory license. Additionally, during this time, Bayer received information that Sorafenat was being exported by NPL in violation of the terms of the compulsory license. After learning this information, Bayer filed a writ petition with the Court requesting that the product covered under the compulsory license be confiscated and any consignment for export be seized. On March 26, 2014, the Court passed an interim order directing NPL to ensure that no consignment containing Sorafenat covered by the compulsory license was exported.

In the present case, NPL sought permission to export 1 kilogram of sorafenib to Hisun Pharmaceutical Co. Ltd. (HPCL), a Chinese pharmaceutical company, for the purpose of conducting development/clinical studies and trials. NPL produced a certificate from HPCL stating that the company required the 1 kilogram of sorafenib for the purpose of “formulation R&D purpose and the same was not intended for any commercial purpose”. In addition, NPL filed an affidavit stating that the 1 kilogram of sorafenib was for the purposes of preparing a trial batch of a generic version of the drug. NPL also stated that for purposes of seeking regulatory approval in China, bio-availability, bio-equivalence and stability studies would be required (per the Chinese Rules and Regulations) and that samples from three consecutive batches of production would be needed (each batch required 1 to 2 kilograms of sorafenib).

Arguments

NPL argued that the 1 kilogram of sorafenib was required for conducting regulatory studies in China and despite the compulsory license, export of the API was exempt pursuant to Section 107A. Bayer argued that the regulatory approvals in China were being sought by HPCL and not by NPL. Bayer contended that the export of 1 kilogram of sorafenib was simply a “commercial transaction” and use by HPCL would not color the transaction. Bayer further argued that exportation of sorafenib was not permitted by the terms of the compulsory license and would not fall within the scope of Section 107A. Bayer stressed that the use by a third party of sorafenib for development purposes did not entitle NPL to infringe Bayer’s patent. Additionally, Bayer argued that because NPL was not conducting any development studies, exportation of sorafenib to HPCL could not be construed to be solely for uses related to the development and submission of information required by any regulatory authority. Finally, Bayer noted that Section 107A did not permit export of Bayer’s product because the word “export” was missing from the section.

The decision

After a review of the facts, the Court accepted that the product NPL sought to export was not for commercial purposes since the amount was only sufficient to make 1000 to 2000 tablets (which was approximately the single trial batch size required by the Chinese Regulatory Authorities). Thus, according to the Court, the only question that had to be addressed was whether Section 107A covered export of a patented product for use by an overseas importer to conduct studies and generate data for the purpose of seeking regulatory approval in that country.

After reviewing the history of the Bolar exemption in the U.S., India’s accession to the TRIPS agreement, the introduction of Section 107A in the Patents Act in 2002 and its subsequent amendment in 2005, the Court stated that the exclusion to a patentee’s right as provided under Section 107A was wider than the exceptions provided by the laws of the U.S. Specifically, the Court stated:

“India is one of the largest producers of generic versions of drugs around the world. Given the economic realities of our country, providing cheaper medicines is a necessity. The parliament in its wisdom has, thus couched the exclusion to a patent, as provided under Section 107A, in wide terms. The sweep of the plain language of Section 107A, thus, cannot be restricted in the manner as canvassed on behalf of Bayer.

…Plainly, Section 107A of the Act takes within its fold any sale of a patented invention which is required for development and submission of information under any law in a country other than India that regulates the manufacture or sale of any product. Indisputably, under the Chinese Law, submission of studies and data related to bio-equivalence and bio-availability of API in a generic version, is required as discussed earlier and the sale of 1 kg. of Sorafenat to HPCL can be reasonably stated to be related to the studies that are required to be conducted by HPCL for obtained the regulatory approvals.

…[t]he language of Section 107A of the Act is determinative of the question whether export as sought for by NPL is permissible within the exemption of Section 107A of the Act. The use of the expression ‘reasonably related to’ as used in Section 107A of the Act would plainly mean a reasonably nexus. Thus, the only question that needs to be answered is whether there is any reasonable nexus between the sale of Sorafenat by NPL to HPCL and submission of information under the law in force in China. In my view, the answer to this question is clearly in the affirmative.

…It is also important to note that the language of Section 107A of the Act is materially different from the law as applicable in U.S. Whilst, the US Law restricts the safe harbour to a sale within United States and solely for purposes related to information under a Federal Law, Section 107A of the Act is circumscribed by no such conditions. Thus, a sale even outside India would fall within the sweep of Section 107A, provided it is reasonably related to development and submission of information as required under a law in force in India or outside India.”

The Court also rejected Bayer’s arguments that the language of Section 107A excluded “exports” because this term was not specifically recited. Specifically, the Court stated:

“I am not inclined to accept this contention for the reason that the expression ‘selling’ is wide enough to even include cross border sales (i.e. exports). If the Parliament intended to restrict the exception to only sales within India, the same would have been expressly stated as was done by the US Congress under 35 US Code 271(e)(1).”

Finally, the Court examined the question of whether Section 107A should be read to include only sales made “within” India. The Court answered the question in the negative for three reasons:

1. The plain language of the section did not support such an interpretation. Specifically, there were no “words or expressions” that allowed such a restriction to be read into this section. In fact, to the contrary, Section 107A expressly permits use for submission as required by the laws outside of India.

2. Even if a purposive interpretation of Section 107A is attempted, such an interpretation favors permitting export. According to the Court:

“[T]he purpose for excluding development activities and uses for regulatory approvals is to ensure that exploitation of patented invention is not restricted beyond the period or sphere of exclusivity granted to the patentee. Thus, although initiative and effort of an inventor must be rewarded, the protection is limited and should not stifle further development and restrict participation beyond the period of exclusivity. There is a strong case for enhancing availability of essential drugs at affordable prices and the safe harbor exception must extend to permit developing overseas sources also.”

3. National barriers offer only limited barriers to trade. As a result, confining the exclusion of Section 107A to sales within India would not aid the object of such exclusion.